Enterprise demand for cloud services has been rising steady in the past two years owing to the rapidly changing global markets and uncertainties brought about by the COVID-19 pandemic. TrendForce’s investigations find that most enterprises have been prioritizing cloud service adoption across applications ranging from AI to other emerging technologies as cloud services have relatively flexible costs. Case in point, demand from clients in the hyperscale data center segment constituted more than 40% of total demand for servers in 4Q20, while this figure may potentially approach 45% for 2021. For 2021, TrendForce expects global server shipment to increase by more than 5% YoY and ODM Direct server shipment to increase by more than 15% YoY.
Global server shipment for 2Q21 is expected to increase by 20% QoQ and remain unaffected by material shortage
Thanks to the accelerating pace of enterprise cloud migration and the long queue of unfulfilled server orders last year as a result of the pandemic, server ODMs will likely receive an increasing number of client orders throughout each quarter this year. For instance, ODM vendors saw a 1% QoQ growth in L6 server barebones orders from their clients in 1Q21, but this growth is expected to reach 15-18% in 2Q21. TrendForce’s analysis indicates that apart from server ODMs maintaining a strong momentum, server OEMs (or server brands) will also be able to significantly raise their unit shipments in 2Q21. The quarterly total shipments from server OEMs for 2Q21 is currently projected to increase by 20% compared with 1Q21 that was the traditional off-season. The COVID-19 pandemic is a major contributor to shipment growth because it has caused a paradigm shift in corporate work practices and spurred companies to accelerate their cloud migrations. The effects of the pandemic have also provided a window of opportunity for the traditional server OEMs, including HPE and Dell, to develop new business models such as hybrid cloud solutions or colocation services that allow their customers to pay as they go, in addition to their existing sales of whole servers.
It should be pointed out that, not only is the shortage of materials within the server supply chain as yet unresolved, but the long lead times for certain key components are also showing no signs of abating. However, in response to the pandemic’s impact on the industry last year, server manufacturers have now transitioned to a more flexible procurement strategy by sourcing from two or three suppliers instead of a single supplier for a single component, as this diversification allows server manufacturers to mitigate the risk of potential supply chain disruptions. TrendForce therefore believes that the current supply of key components including BMCs and PMICs is sufficient for server manufacturers, without any noticeable risk of supply chain disruptions in the short run.
Huawei and Inspur maintain brisk server shipments due to favorable domestic governmental policies and demand from cloud service providers
China’s server demand, which accounted for about 27.2% of the global total in 1Q21, continues to grow annually. Favorable policies and support from domestic cloud service providers are the main demand drivers in the country. Shipments from domestic server OEMs have remained fairly robust in China on account of the build-out of the hyperscale data centers across the country. Another reason is that Chinese telecom companies procure servers mostly from domestic manufacturers. Taken together, these aforementioned factors directly contributed to the server shipments of Inspur and Huawei in 1Q21.
Huawei’s server shipments are relatively unaffected by the US-China dispute, even though the sanctions enforced by the US government constrained Huawei’s component supply. The demand for Huawei servers has been boosted by telecom tenders and procurement from domestic enterprise clients. A QoQ growth rate of roughly 10% is projected for 2Q21 on account of a new round of government tenders. As for the whole 2021, Huawei’s annual shipments are still forecasted to register a YoY growth rate of about 5%. Thanks to infrastructure programs and rising orders from data centers, Inspur is expected to capture around 30% of China’s total server demand in 2021. On the matter of product strategy, Inspur already has a sizable ODM business with tier-1 Chinese cloud service providers (i.e., Baidu, ByteDance, Alibaba, and Tencent). The volume of incoming orders for the first half of this year will also be quite massive because tier-2 cloud service providers and e-commerce platforms such as JD.com, Kuaishou, and Meituan will be injecting significant demand.
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